May Industrial Production

◆The May 2014 indices of industrial production achieved growth for the first time in two months, up 0.5% m/m, while at the same time falling below market consensus, which recorded +0.9%. In light of the April downturn, growth in May is considered to have been modest, leading to a sense that production has entered a slowdown. The shipment index fell for the fourth consecutive month at -1.2% m/m, while the inventory index rose for the first time in two months by +2.9% m/m, hence accompanied by an increase in the index of inventory rate for the first time in two months at +3.5%.

◆As for production by industry in May, eight out of the total of fifteen industries recorded month-to-month growth. Of those reporting growth, transport equipment, textiles, and electronic components/devices helped push up overall results.

◆According to METI’s production forecast survey, June production schedules are expected to suffer a decline of -0.7% m/m, while July is seen regaining some ground at +1.5% m/m. The result of this fluctuation is that on the whole, production is expected to mark time in the near future. As for June production plans by industry, information communication electronics equipment is expected to continue the declines experienced in May with a further decline of -5.7% seen. Meanwhile, transport equipment is expected to be down by -4.1%, helping to push down overall industry performance. There are also signs of a turnaround in July, the major factor being the general purpose production and business oriented machinery industry, which expects major growth of +8.0% m/m. But all in all, production is expected to falter in the near term, with the information communication electronics equipment industry expected to fall even more deeply into the downtrend at -10.3% m/m. we suggest keeping a sharp eye on future trends.